Is Democracy in Decline Globally?
Corruption and debt darken the global outlook for democracy.
By Frank Vogl, February 21, 2021
Credit: World Bank Photo Collection www.flickr.com
Takeaways
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According to the Corruption Transparency Index, government corruption is
perceived to be high in more than two-thirds of the 180 countries surveyed.
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That the Economist Intelligence Unit (EIU) has demoted the US from “full
democracy” to “flawed democracy” should escape nobody’s attention.
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Beyond the US, 2020 was a terrible year for democracy across the globe.
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Approximately 85% of all foreign debt held by 120 middle and low-income
countries is on non-concessional terms.
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The big hope for 2021 is that leading Western industrial countries will
overcome the pandemic and that this may set off a boom start in their
economies.
·
The fact that the Economist Intelligence Unit (EIU) underscores that the
United States is a “flawed democracy” and far behind its northern neighbor
Canada — a “full democracy” — in its new annual Democracy Index should
escape nobody’s attention.
It is a sad testimony to the parlous state of democracy in today’s world —
and the true legacy of Donald Trump’s stint in the White House.
2020 was a terrible
year
Beyond the United States, 2020 was terrible for democracy across the globe.
Many governments dispensed with parliamentary oversight and checks and
balances, canceled or postponed elections, prohibited public protests,
curtailed freedom of expression and perpetrated healthcare fraud and
corruption.
The overall state of global democracy took a dive in part because democracy
in Hong Kong got hammered by China.
It suffered badly in Mali, leading to a military coup — due in part to
terrorist insurgents — and, on a regional basis, trends across the Middle East
and North Africa — as well as Latin America — were depressing.
According to the EIU, the list “may sound dystopian, yet this was the
experience of most people in 2020.” I believe 2021 may be worse.
Corruption pervades
For some years, the EIU’s survey has been painting a picture of democracy
in retreat. Now, in part due to the COVID 19 pandemic, authoritarianism is
gaining.
The depressing finding is reinforced by the newly published Corruption Transparency
Index (CPI), issued annually by Transparency International
(TI). It shows that government corruption is perceived to be high in more than
two-thirds of the 180 countries surveyed.
Financial turmoil
The big hope for 2021 is that leading Western industrial countries will overcome
the pandemic, with at least a great majority of their populations vaccinated,
and that this may set off a boom start in their economies.
The global impact of such a development, so the hope goes, would lift all
boats and pull the poorest countries out of the rough seas that engulf them.
Poor governance stands
in the way
And yet, the continuing reality of poor governance including corruption —
along with increasing authoritarianism — may counter the positive impact of a
revival of Western economies.
The critical issue, as I have warned before, is
that many of these countries are over-burdened with debt.
On the domestic front, some of these countries are just broke — mainly
thanks to pervasive corruption. Lebanon is one current example, South Africa is
another.
In January, amid calls for far greater spending to counter the pandemic,
South Africa’s President Cyril Ramaphosa
confessed: “We do not have the money . . . that’s the
simple truth.”
“High risk”
Domestic debt crises are compounded by the rising challenge that many
countries have in servicing their foreign debts. A decade ago, many developing
countries were encouraged by private investment managers to use the private
markets to borrow — and they did.
Meanwhile, approximately 85% of all foreign debt held by 120 middle- and
low-income countries today is on non-concessional terms. It is owed to hedge
funds, pension funds and other private investors.
A new report by
World Bank economists Peter Nagle and Naotaka Sugawara concludes: “More debt
defaults and debt distress are possible.”
I think that is an understatement — more countries will default. Their
debts are unsustainable. They will follow Lebanon, Argentina, Zambia and others
into debt restructuring negotiations with their private creditors.
The two economists provide a new chart that shows that more than 40% of the
countries are now viewed as being in the “high risk” category.
IMF bailouts
The prospect of the world’s worst sovereign debt crisis is leading G7
finance ministers to start developing plans for a large boost to the
resources of the International
Monetary Fund (IMF). The Biden administration, unlike the
Trump team, supports this.
The plans, likely to be finalized by the summer, may see the IMF striving
to bail out many of the debt-distressed countries and help them to restructure
their private debts, but this just adds debt upon debt while aiding the private
creditors.
Conclusion
The solution, which may also include further postponement by official
creditors of debt repayments to them from the poorest nations, may stave off a
global financial crisis.
But it will do very little for the poorest people in the debt-defaulting,
high-risk, non-democratic countries.
Equally bad, such solutions do nothing to counter the grand corruption that
pervades so many countries and that is adding gravely today to poverty — while
sustaining the decline of democracy across the world.
One piece of good news: The EIU reported that improvements in transparency
in government and elections in Albania enabled this country to move up in 2020
from a “hybrid” country close to authoritarianism to the “flawed democracy”
group — thus joining the United
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